In the past, big cable companies acted as gatekeepers that decided what we watched. Today, we can watch practically anything on streaming services like Netflix and the internet.

WWE took advantage of this to launch a “Netflix-style” streaming service for wrestling. By bypassing cable companies to connect directly with fans, WWE has transformed its business.

Thanks to 1.8 million streaming subscribers, its revenue has jumped to all-time highs.

A few years ago, WWE was at the mercy of cable companies. Half of its revenue came from TV contracts. Today, just one-third of its revenue comes from traditional TV.

E-Sports Has Been on “the Fringe” for Decades Too

And like WWE, streaming video is unleashing its full moneymaking potential.

As I mentioned, people can now watch whatever they want on the internet. And it turns out hundreds of millions of people like to watch others play video games professionally.

Have you heard of Twitch? It’s a website owned by Amazon (AMZN) that broadcasts video game matches. More people watch it every day than CNN or MSNBC.

And that’s the key to this whole thing: Video gaming has a massive audience of engaged fans. And that’s the most valuable asset in content business.

In fact, a massive audience of engaged fans is the source of the financial strength of the NFL and NBA. It’s why the Dallas Cowboys are worth $4.2 billion and the New York Knicks are worth $3.6 billion.

They’ve each got millions of fans not only watching them on TV, but buying tickets, memorabilia, and merchandise year after year.

Based on the stats I shared with you earlier, I’m convinced the global fanbase for e-sports is bigger than the NFL and NBA combined.

This fanbase has been there for decades. But it took the disruptive force of streaming video to bring fans together online in huge numbers. E-sports is shining a light on just how gigantic and enthusiastic the video game audience really is.

I believe this industry is just in its infancy. People are going to be shocked at how fast e-sports grow in the next five years.

How Do We Profit from This?

This year, people will spend around $138 billion on video games. That’s a 95% surge from six years ago. Look at this chart of my three favourite gaming stocks vs. the S&P 500:

Source: Yahoo Finance

As you can see, they’ve all beat the market. I think that’ll continue as the popularity of e-sports explodes.

Here’s a rundown of why I like each stock:

1. NVIDIA Corporation (NVDA)

(NVDA) makes high-performance computer chips used for gaming. They can cost up to $3,000 a piece.

NVDA’s chips are the gold standard in gaming. 86% of competitive gamers use them, and NVDA has become the official hardware provider for almost every major e-sports league in the world.

2. Activision Blizzard, Inc. (ATVI)

As I wrote in my other essay on Netflix and Disney, producing great content is a bigger competitive advantage today than ever before. (ATVI) is one of the world’s best video game makers.

It owns five franchises that have brought in over $1 billion in revenue. And its games are among the most widely played in the e-sports world.

And get this… ATVI recently struck a deal with Disney to broadcast its popular Overwatch League matches live on primetime ESPN.

3. Tencent Holdings Limited (TCEHY)

Not many people know this, but Chinese social media giant Tencent (TCEHY) is the largest gaming company in the world. Its gaming revenue is 72% higher than second place Sony.

It owns mega-hits like League of Legends, Fortnite and Clash of Clans. If you have teenage sons or nephews, you probably know that millions of kids from here to China play Fortnite.

Tencent’s bread and butter is mobile gaming, like on smartphones. Mobile gaming now makes up 51% of the global gaming market.

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